With 19 billion yuan invested in upstream and downstream, Ningde Times will join the car-making army?

CATL announced that it will invest in high-quality listed companies in the upstream and downstream industrial chains at home and abroad. The total investment this time will not exceed 19.069 billion yuan, of which the total overseas investment will not exceed 2.5 billion US dollars.
Regarding the reasons for the investment, CATL stated that with the advancement of global energy reform and transformation and upgrading, and the gradual improvement of environmental protection standards, the new energy vehicle and energy storage industries have developed rapidly in recent years, but there are still imperfect supporting facilities and key resources in the industrial chain. Shortcomings such as insufficient supply. Therefore, in consideration of long-term strategic development, the company plans to focus on its main business and invest in high-quality listed companies upstream and downstream of the industrial chain to further strengthen cooperation and coordination in the industrial chain, improve resource utilization efficiency, and enhance the company’s market competitiveness.
After this announcement was released, it immediately sparked heated discussions in the industry, and also caused all parties to speculate about the investment targets of the Ningde era. The more common view is that CATL, as the dominant player in the power battery industry, will exert its efforts on the supply chain to ensure the safety of the supply of key raw materials on the one hand, and to consolidate its position in the entire industrial chain on the other hand.
Affected by this good news, on August 12, the individual stocks of the CATL industry chain were bullish. For example, Pioneer Intelligence, GEM, Rongbai Technology, etc. all rose to varying degrees.
In addition to the supply chain, the investment in the downstream of CATL has also caused speculation. There are views that CATL is likely to invest in a vehicle company to further coordinate the industrial chain and increase its influence. On August 12, Cao He, president of Quanlian Automobile Investment Management (Beijing) Co., Ltd., told a reporter from 21st Century Business Herald: “When the upstream power is large enough, it will build its own car.”
CATL has always been closely related to vehicle companies. In addition to supplying batteries for vehicle companies, the company has established joint ventures with many vehicle companies to establish battery companies. The relatively low-key thing is that CATL has also participated in new car manufacturers before. Teng’s investment, but Byton has exploded this year, and normal operations are no longer sustainable. Will Ningde Times reinvest in vehicle companies in this context? The company did not provide more details.
The cost of power battery is still high
In recent years, with the continuous development of the new energy automobile industry, CATL has gradually grown into one of the best companies in the field of power batteries, as well as worldwide. This time, CATL announced its investment in high-quality enterprises in the upstream and downstream of the industrial chain, which is intended to enhance the coordination and cooperation of the entire industrial chain.
The relevant team of Western Securities analyzed and pointed out that CATL plans to spend 19 billion yuan in foreign investment in the next year. It is estimated that there are three considerations in order of importance: one is to invest in the upstream resource nickel, cobalt and lithium company to ensure the safety of the supply of key raw materials; Invest in midstream companies in high-barrier industries to ensure and consolidate the status of the industrial chain and the right to speak; the third is to support industrial chain enterprises through investment and technology to achieve rapid development and jointly realize growth value.
The investment in the upstream industrial chain has basically reached a consensus in the market. CICC’s research report also analyzed and pointed out that although the Ningde era has a strong cost advantage based on a complete supply chain system, at the current node, the company also faces two challenges: First, the industry demand is standing in a sharp explosion. On the eve, the requirements for supply chain stability, low cost, large scale, and reliability have been further strengthened; second, the NCM811 technology in the Ningde era continues to advance, and further cooperation and support are needed for materials companies with advanced material supply capabilities.
In the short term, the cost of power batteries is still under further pressure. Even in the Ningde era, it is necessary to further reduce costs and increase efficiency. Investing in upstream raw material suppliers is one of the effective ways. On August 12, at the 2020 China Automotive Blue Book Forum, the chairman of CATL, Zeng Yuqun, said frankly that the cost control of power batteries is still a major problem.
The cost of power batteries, the core components of electric vehicles, cannot be reduced, which will limit the sales of electric vehicles to a certain extent. This year, under the influence of multiple factors such as the sluggish macro environment, the once rapid development of new energy vehicles has seen a significant decline in China-if the core issues are not resolved, the first-mover advantage of China’s new energy vehicle industry may also be lost.
Zeng Yuqun predicts that sales of new energy vehicles in Europe will surpass that of China this year, and domestic practitioners may also “get up early and catch up late.” “Because we finished all the infrastructure, they started selling hot.”
His worries are not unreasonable. Statistics show that in the first half of this year, sales of new energy vehicles in Europe increased by 52% year-on-year, while sales of new energy vehicles in China fell by 44% year-on-year. At the same time, in the first half of the year, the global installed capacity of Ningde era power batteries was also overtaken by LG Chem, losing the championship.
In the long run, power batteries with more advanced performance are also the driving force for the development of the industry. CATL is also conducting research and development in various aspects, which also depends on the support of emerging suppliers. CICC predicts that equity investment can help suppliers achieve scale guarantee. “At present, the investment in the four major material capacity required for a single GWh battery is about 240 million yuan, and the direct investment of 20 billion yuan can correspond to the demand for 82 GWh. The leverage of equity investment can further enlarge the protection of this scale.”
The battery one wants to build a car?
The investment layout of the upstream of the industry chain has basically reached a consensus, but how to arrange the downstream is quite controversial.
Although it is rarely mentioned in securities research reports, some in the auto industry believe that the CATL may enter the field of car manufacturing. Cao He pointed out that Ningde era already has the strength to expand abroad, and it is not surprising to expand downward investment in vehicle companies. He analyzed that as new energy vehicles further expand, the upstream industry chain will be moved down to make complete vehicles in the future. Two.
Ningde Times is a hot supplier for many domestic automakers. In the past two years, many auto companies have established joint venture battery companies with Ningde Times in order to deepen cooperation with Ningde Times and guarantee supply, including SAIC, Dongfeng Group, GAC Group, Geely Automobile, etc., but the main businesses of these companies are batteries or batteries, and have no direct connection with car manufacturing.
In addition, CATL only participated in the investment in Byton in 2018. At that time, Byton Automobile announced that it had received US$500 million in Series B financing, with the participation of FAW Group, TusHoldings, and CATL. However, this year Byton has run into operational difficulties, and the “car road” of the Ningde era came to an abrupt end.
Power battery companies “cross-border” car manufacturing have long been speculated in the industry. Previously, Tianren Group’s founder and chairman Zhang Tianren said in an interview with the media: New energy vehicles are the final product, and batteries closely cooperate with them, and may consider entering the field of new energy vehicles in the future.
Some analysts believe that as the profits of power battery companies are getting thinner and the upstream and downstream are further squeezing the profit space, they will consider building their own cars to relieve the pressure, only to be tightly tied with the vehicle companies. Only power battery companies can win the opportunity.
However, car manufacturing and power battery R&D and production are completely different fields. It is not easy for companies to rashly cross-border, especially car manufacturing, like power batteries, is a high-input and long-term industry. For power battery companies, in addition to guaranteeing orders, it is also difficult to say how much synergy can be generated in the business field of investment car companies-and the Ningde era obviously has no shortage of orders.
The downstream mentioned by CATL may not be the manufacture of complete vehicles, but the operation services closer to the battery industry. At the forum, Zeng Yuqun also mentioned that the company will strengthen cooperation at the industrial chain level and carry out business model innovation, extending from minerals, raw materials, battery manufacturing to operational services, including energy storage, battery utilization and so on. “Various models, such as power exchange, leasing, etc., are very good explorations.” Zeng Yuqun said.
It is worth mentioning that CATL was rumored to invest in the battery asset management company planned by Weilai Automobile. NIO’s energy layout is relatively complete, and it has explored new operating modes such as battery swaps and separation of vehicle and electricity. The purpose of the above-mentioned battery asset management company is to manage NIO’s battery assets and help NIO integrate the entire vehicle and battery assets. The ownership rights are stripped away.